In a dramatic turn of events that rattled the digital banking sector, the Commercial Bank of Ethiopia (CBE), the largest financial institution, encountered a severe system malfunction early Saturday morning, March 16, 2024. The disruption, which unfolded over the weekend, led to a temporary freeze of digital financial services across the industry, sparking widespread customer concern.

An unusual transaction surge was processed overnight on Friday last week, overwhelming CBE's digital platforms and online assets. During that timeframe, depositors were able to conduct unauthorised withdrawals or transfers. Industry sources claimed close to 66,000 customers conducted at least 25,000 transactions, totalling nearly 2.4 billion Br. However, CBE executives have not confirmed these claims.

The malfunction that credited transfers but failed to debt accounts exposed the vulnerabilities of digital banking infrastructures and the intricate web of dependencies underpinning the modern banking ecosystem.

As the extent of the malfunction became apparent, private banks received alerts to halt all digital transactions. The precautionary measure, aimed at containing the fallout, effectively paralysed digital banking operations for several hours on Saturday. The halt impacted a wide array of services, including ATM withdrawals, internet banking, and mobile bank-to-bank transfers, leaving customers in a lurch and searching for alternatives.

CBE's official channels swiftly apologised for the inconvenience and reassured the public that no external cybersecurity breach had occurred. However, the incident served as a stark reminder of the interconnectedness of the financial institutions and the collective efforts required to maintain the integrity of the banking ecosystem.

CBE President Abie Sano admitted the glitch source was internal.

"The problem is all internal," he told Fortune on Saturday. "Now fully controlled."

His acknowledgement of the incident as "fully controlled" belied the underlying risk of fixing the "inappropriate transactions". According to Abie, discerning between legitimate and erroneous transactions would require time and a detailed investigation, emphasising CBE's challenges in the aftermath of the system's failure.

Operations resumed later in the day. However, the malfunction did not go unnoticed by many, particularly university students in Jimma, Bahir Dar and Dire Dewa, who took advantage of the glitch to transfer funds between banks. Campus administrations, such as Jimma University, swiftly urged its students to return any improperly acquired funds, advising them to avert potential legal consequences.

The industry was cautious, responding promptly to contain the spread, after being alerted.

A national switch operator, EthSwitch, was incorporated 13 years ago by commercial banks and the National Bank of Ethiopia (NBE) as shareholders to facilitate interoperability among the banks.

One of the shareholders is Oromia Bank. According to its President, Teferi Mekonnen, the particular vulnerability of ATMs, unlike human-operated branches, is less equipped to detect irregularities.  "We're all in one ecosystem," he told Fortune.